A few years ago Whole Foods Market decided that organic food didn’t go far enough. Never mind that organic is the upscale supermarket’s largest product category, accounting for 25,000 items on its shelves. Never mind that co-CEO and co-founder John Mackey is almost surely the individual most associated with today’s organic movement and most responsible for taking it mainstream.
In Mackey’s view, organic had grown stale. Its guidelines prohibit the use of synthetic fertilizers and pesticides, which is a good thing, he says. But they don’t address all the burgeoning issues—from excessive water usage to the treatment of migrant laborers—facing agriculture today. And once farmers are certified as organic, Mackey believes they have little incentive to improve their practices. “Organic is a great system, but it’s not a complete solution,” he says. “We feel like Whole Foods should take a leadership role in this. Who else is going to do it?”
So in late 2014, Whole Foods(WFM) rolled out a new rating system called Responsibly Grown, which measures factors like energy conservation, waste reduction, and farmworker welfare.
You could hear the blowback from Monterey County, Calif., to New York’s Hudson Valley. Phone calls and emails flew from one local organic homesteader to another, with many fearing that the new rating system would undermine their brand. When Vernon Peterson of Abundant Harvest Organics in Kingsburg, Calif., brought the issue to the attention of the California Certified Organic Farmers organization, where he’s treasurer, they unanimously decided, “We should fire every bullet we had.” Eventually he and a handful of fellow farmers sent an open letter to Mackey, complaining that the new rating parameters were “onerous, expensive,” and shifted the cost of marketing to growers, “many of whom are family-scale farmers with narrow profit margins.” The New York Times picked up the story, airing it on the front page of the business section. NPR broadcast a lengthy segment on Morning Edition. Says Peterson: “This was a hill to die on.”
In the end Whole Foods made some tweaks to the new program but hasn’t backed down. The 62-year-old Mackey, for his part, seems utterly undaunted by the hullabaloo. Indeed, if there’s one thing to be said about the man, it’s that he has never been afraid of pissing people off. “I am absolutely a contrarian,” he tells me at Whole Foods’ Austin headquarters in one of the first of our many conversations for this story. “You need dissonance, and you need someone who is challenging things. Otherwise you get stuck.”
The same term would certainly apply to Whole Foods itself right now: The company is in a period of dissonance, one that makes the attacks on its Responsibly Grown program seem like small organic purple potatoes. First came accusations, in June, that its stores overcharged customers in New York City—which prompted investor lawsuits as well. Then, in August, comedian John Oliver spent three minutes on HBO’s Last Week Tonight mocking Whole Foods for selling bottled water laced with asparagus stalks … for $5.99. The company said it was a mistake, but the episode gave yet more currency to the notion that the chain dubbed “Whole Paycheck” was out of touch.
The store’s numbers haven’t been pretty either: Same-store sales growth last quarter was at its lowest level since 2009, a fact blamed in part on the New York City investigation and on the longer-term concern that it is facing stiff competition in the healthy-eating ethos up and down the grocery food chain—from Kroger (KR) and Walmart(WMT) to Trader Joe’s and Sprouts (SFM). All of this Sturm und Drang has been reflected in the company’s stock price. In mid-August shares hit a three-year low, representing about a 50% loss of market cap since October 2013.
“They’re getting Tom Brady-ed,” says BB&T (BBT) Capital Markets analyst Andrew Wolf. “They’re getting piled on.”
What better time to test what is perhaps Mackey’s most dissonant, brazen idea yet?
He calls it “conscious capitalism,” a mode of doing business that attempts to create value for all stakeholders—employees, customers, community, shareholders—rather than sublimating the needs of the first three to those of the last. The idea is an old one, dating at least as far back as the 1980s, to the work of R. Edward Freeman, now a professor at the University of Virginia’s Darden School of Business, whom many consider the father of “stakeholder theory.” But Mackey, who co-authored a bestselling book on the theme in 2013, has become the closest thing to a modern-day spokesman for an idea that, dare we say, has found its time.
Mackey leans on his favorite lightweight Gossamer Gear hiking poles on a field in Boulder in August.Photograph by Wesley Mann for Fortune
For evidence, consider the who’s who of America’s business and financial elite who have echoed the theme—often coining first-cousin terms like “compassionate capitalism” (Salesforce’s Marc Benioff), “creative capitalism” (Bill Gates), and “just capital” (investor Paul Tudor Jones) to frame their philosophies. Wrapped up in all these notions is the fundamental precept that profits and purpose should go together—and that companies that marry the two faithfully will outperform the competition over the long term.
That many investors flatly don’t care about the long term is, of course, another matter. Wall Street cares largely about the now and the near future—and right now, and very likely in the near future, Whole Foods is struggling.
Mackey, once again, seems undaunted. “This is where your philosophy gets tested and when you get tested—your own commitment to it, your own integrity. It’s all in question. It’s all in play,” he says. “If you’re going to wreck your company or values just because you’re being attacked, then you’re not very deep.”
Deeply, profoundly,tohis core, John Mackey is a capitalist. Though critics over the years have labeled him any number of things—anarchist, socialist, even Marxist—make no mistake, Mackey is a true believer in (mostly unfettered) free enterprise, and his love for it is like that of a convert who finds salvation later in life.
His conversion was not a peaceful one. He had been part of the food co-op movement—and when he abandoned that to start his own for-profit health food store, a group of his friends became ex-friends and gave him the nickname Darth Vader. (He had gone from the light to the dark.) “I got a lot of hate,” he says. “But I didn’t feel like I was evil because I was trying to earn a living and create stores better than the co-op. I didn’t see why I had to apologize for that.”
In many ways Mackey is still the old liberal, granola-chomping hippie he was in his early twenties: He is pro-choice, supports gay marriage, and is for the legalization of marijuana. Yet he also opposes labor unions and once penned a Wall Street Journal op-ed that ran under the headline The Whole Foods Alternative to Obamacare that endeared him to the Tea Party. He is a man who resists media training, although he says he is not as brash and provocative as he once was, that he’s not as ego-driven. “He’s so who he is every minute of every day,” says Whole Foods CFO Glenda Flanagan, who has worked with Mackey for 26 years. “He doesn’t change who he is for anybody or any circumstance.”
“If I had adopted the general philosophy of the left, I would have been loved instead of hated,” Mackey says. “I just couldn’t do it. I’d rather be authentic and have my own intellectual integrity and have a lot of people misunderstand me. If they’re going to attack me I can live with it.”
He is far more sensitive, however, about attacks on Whole Foods. And while I’m in Austin this summer, the company is weathering a blow. The executive team is doing its best to respond to allegations by New York City’s Department of Consumer Affairs that the company systemically overcharged customers for some prepackaged goods. Mackey and his co-CEO, Walter Robb, film a short video in front of the produce section, offering an apology—but insist the errors (having to do with the net weight of the products) were unintentional and were just as often in the customer’s favor.
“This stuff goes viral,” Mackey tells me, “because people are eager to believe bad things about Whole Foods so it doesn’t disrupt their mental model” of business as selfish and greedy. It’s similar to how people scrutinize his diet. “They want to catch me on stuff,” says Mackey, who is a vegan and abstains from processed food. “They want to prove I’m a hypocrite. I think that’s true for Whole Foods as a whole.”
He believes that this prevailing narrative of business—as a selfish and exploitative enterprise—stems in part from intellectuals’ attack on capitalism throughout history, which has fueled the public’s mistrust and skepticism. But another key contributor to this perception, in Mackey’s worldview, is that the dominant business theory of “profit maximization” has been a toxic one. “A metaphor I like to use is that my body can’t live unless it’s making red blood cells,” he explains. “If I stop making red blood cells, I’d be dead in no time. It does not logically follow that the purpose of my life is to make red blood cells.” The same logic applies to business. If a business does not make profits, it dies. But it does not follow that the purpose of business is to make profits.
In the early 2000s, Mackey began giving talks about a new business paradigm and a different kind of leadership, one based on Freeman’s stakeholder theory. Central to the view is that these disparate groups aren’t necessarily at odds. Corporate management teams that are taking action to benefit one stakeholder at the expense of another simply aren’t thinking creatively enough. As Mackey explains, no one has to lose: Business can create an ever-expanding pie, one in which customers and employees and the community at large should benefit as a company grows larger and shareholders are rewarded.
A still more revelatory moment came when Mackey read an advance copy of the book Firms of Endearment, co-authored by Raj Sisodia, explaining how enterprises with passion and purpose outperform. “For a long time I thought Whole Foods was just a weird company and nobody was like us,” he says, “and I read that book, and I realized that we were not alone.” Sisodia visited Mackey in Austin, and the two started using the term “conscious capitalism,” a phrase credited to Nobel Peace Prize winner Muhammad Yunus, author of Banker to the Poor and founder of the Bangladeshi microfinance lender Grameen Bank.
Sisodia and Mackey invited a number of executives to a summit on the notion of purpose-driven business in 2008 and the following year created a nonprofit enterprise called Conscious Capitalism Inc. But to really spread the movement, Mackey and Sisodia knew they needed a manifesto of sorts: a book targeted at executives. “I felt like businesspeople needed to understand how much value they were creating in the world—that they were good people,” Mackey explains. Says Rick Voirin, the chairman of Stagen, a leadership training firm, and a former board member of Conscious Capitalism: “It pains John that business leaders are thought of so lowly.”
When Conscious Capitalism: Liberating the Heroic Spirit of Business debuted in 2013, it popped onto various business bestseller lists—but the readers who seemed to relate best to the message were fellow chief executives. “I never realized I was a conscious capitalist until John told me that was the title,” says Panera Bread (PNRA) CEO Ron Shaich. “He’s provided the ideology and language around the approach.”
Two years later Mackey is still proselytizing. In mid-August he travels to the University Club of Chicago to give a talk sponsored by Unilever, a company in the broader shared-value movement. It’s the sixth day I’ve spent with him for this story, but the only time I’ve seen him in anything but shorts. (He is wearing khakis and a Patagonia fleece in lieu of a blazer.) During his presentation, Mackey outlines what’s required to be a conscious leader: analytical, spiritual, emotional, and systems intelligence. Analytical intelligence is what we teach in schools and entails dividing things up to understand them, he explains. Systems intelligence is the opposite—how the puzzle fits together. Later, over lunch (at a local Whole Foods), Mackey says that most people don’t have systems intelligence—which is why many don’t fully grasp stakeholder theory. They don’t get the interdependence, he says. What’s more, they think that if a corporation benefits from an action, the motive must be questionable.
But it’s not as simple as being either self-interested or altruistic, he says. You can be both. Mackey offers the example of the company’s “community giving days,” which are held once per quarter. On those days 5% of a Whole Foods store’s net sales are given to a local nonprofit. It’s the stakeholder model at work, he contends: It creates goodwill with customers, motivates team members, and takes care of communities. “Is it good business for us to do these things?” asks Mackey. “Absolutely.”
Consider the company’s decision to open a store in Detroit, where about 40% live below the poverty line. The project was the brainchild of Robb, who was growing increasingly concerned by Whole Foods’ reputation as a white, elite, expensive company. Whole Foods, he says, “was meant to be healthy food for the world, not just for a few people.” Mackey, however, was skeptical at first: “I’m going to trust you on this, Walter, but I don’t want to lose money,” Robb recalls his partner telling him.
It took less than a year for the store to turn profitable—which led to plans for markets in Newark and Chicago’s South Side (both slated to open as early as next year). But even more important, the Detroit location—with its smaller footprint, fewer products, and lower prices—offered a proof of principle that the company could appeal to a much broader group of shoppers than its current demographic.
The experiment had a surprising dividend: offering key lessons for Whole Foods’ new “365” chain—smaller, lower-priced versions of the flagship brand that will begin rolling out next year. Detroit “gave us some confidence that we could go in this direction,” Robb explains. “365 is an evolutionary strategy,” says Mackey—a way to combat the competition and the next step in broadening access to healthy food, which is the company’s core mission.
Such highfalutin talk may sound to many like marketing blather. But spreading the gospel of healthy eating is something Mackey is truly, unabashedly passionate about. As with capitalism, he was a late convert to the cause. He did not become interested in healthy food until joining the Austin co-op—a start he recognizes as way too late. “If I drop over from a heart attack,” he says, “I’m blaming it on my early childhood poisoning.”
Mackey has spent the lion’s share of his 62 years recovering from that food abuse. When he cooks dinner for me and members of his executive team at his home in Old West Austin in late June, the menu is salad—homemade, oil-less, vegan Caesar dressing on the side—local summer corn, sweet potatoes, and tofu with mushrooms, broccoli, and tahini. Mackey whips up avocado chocolate pudding for dessert with his Vitamix—his secret weapon in the kitchen. When he travels he packs a rice cooker to make oats for breakfast. People scrutinize what Mackey eats, but he is known for being a refrigerator voyeur himself. He offended his wife, Deborah, on their first date by looking in her fridge—he wanted to see her level of “food consciousness.”
For a Fortune 500 CEO, Mackey’s home comes across as modest, decorated with furniture and art from India, where his wife travels frequently. Just off the front entryway is his “man cave,” which sports an exercise bike, an inversion table, and his reading chair.
Mackey, a voracious reader, often has seven or eight books going at a time spanning from science fiction to economic theory. That intellectual thirst started in college, when he took mostly religion and philosophy classes and transferred back and forth between Trinity in San Antonio and the University of Texas at Austin. “I was not interested in ideas until then,” he says.
Some days Mackey would go to the library at 8 a.m. and not emerge until after midnight. “I thought John was probably just the brightest kid at UT,” says Kip Tindell, a college housemate of Mackey’s and CEO of the Container Store (TCS), another company that’s part of the conscious capitalism movement. “He’s probably still the most interesting kid in Austin, Texas.”
Mackey loved school but hated assigned texts. One night when he was reading Being and Nothingness by Jean-Paul Sartre, Mackey threw the book on the ground, dropped the course the next day, and decided he’d never read another book he didn’t want to read. He identifies this as the moment when he started to take control of his life. He hitchhiked to New York, grew his hair out, and told his parents he might not get a degree. He dropped in and out of school—never graduating despite having well over 100 credits.
During this period, Mackey was overcome by the enormous diversity of thought in the world—the expanse of different religions and philosophies. He became a born-again Christian because of a girl he fell in love with. He went through an existential, atheistic stage and then became spiritual again—this time in a nonreligious way. He began to meditate. Today he sometimes calls himself a perennialist: a person who believes that beneath all religious traditions there is a universal truth found through spiritual experiences, not through faith or dogma.
He joined a vegetarian housing co-op—the story goes that he did it to meet interesting women. At the time he thought capitalism was the source of society’s problems and that cooperation was better than competition. “It was a very seductive philosophy,” he says. But the deeper he got into the co-op movement, the more he viewed it as dysfunctional—hijacked by the most politically active, who were more interested in boycotts than creating value for members. Mackey was sure he could do it better. He and his then-girlfriend, Renee Lawson, started SaferWay, which evolved into Whole Foods when it merged with the health food store across town.
His father was an accounting professor turned CEO of a small health care company, and he mentored his son in business. Mackey read tome after tome of economic theory—Milton Friedman, Friedrich Hayek, and Ludwig von Mises—with all of his discoveries pointing to a transformative revelation: Capitalism, he now believed, was humanity’s single greatest invention. It made all other progress possible.
On Sept. 11, 2001, Mackey was on his way to the S&P ratings agency near the World Trade Center, close enough to the falling towers that debris rained down upon him. “It reminded me to take care of the things I wanted to do,” he says in reflection. The next year he took a five-month sabbatical to hike the Appalachian Trail. Mackey gave himself the trail name Strider, pulled from one of his all-time favorite novels, The Lord of the Rings. “Strider was the grisly ranger, and nobody knew who he was, but he was secretly a king,” he says. “While I was on the trail and I was Strider, nobody knew I was the king of Whole Foods Market.”
Every couple hundred yards on the Appalachian Trail there’s a two-by-six-inch blaze on a tree that lets hikers know they’re on track. Mackey would joke with his friends that it would be great if life had these little blazes that said you’re on the right path.
In the summer of 2006, Mackey was hiking when he was struck by the notion that he should go to a $1-a-year salary. Whole Foods already had progressive compensation policies. The entire executive team, which makes decisions by consensus, has the same paycheck, and the total cash compensation paid to any employee in a calendar year is restricted to no more than 19 times the average annual wage, including bonuses, of all full-time employees. But Mackey felt as if he had made enough money in his life, and it increasingly bothered him that people would dismiss his arguments about conscious capitalism because of his pay. If he was really going to be a servant leader to Whole Foods, he didn’t want any money conflict. “I wanted to take it off the table,” he says. (The company donates stock options Mackey would have received to one of its foundations.) The only time he’s ever had second thoughts was in 2008, when everything collapsed. The company suspended its dividend, and Mackey had no cash flow. “The best thing about doing something public,” he says, “is you really are the hypocrite if you go back on it.”
Mackey can often seem adamant about his beliefs, but he has a reputation for changing his mind. “John, more than most other high-profile people, is willing to make radical changes and complete changes on things,” says Doug Rauch, the former president of Trader Joe’s and the current CEO of Conscious Capitalism. The most prominent example took place in 2003 at a shareholder meeting in Santa Monica when Mackey got into a heated exchange with an animal-rights activist who said the company wasn’t going far enough. Mackey took the summer to read a dozen books on livestock and animal agriculture and let it marinate while he hiked the Colorado Trail. When he got home, he sent her an email telling her she was right. That led to the company’s animal-welfare rating standards that are in place today.
The episode inspired Mackey to go from vegetarian to ethical vegan. For the first year or two he ate eggs from the chickens at his country place outside Austin. But people were always bringing it up. So again he decided to “take it off the table.” Says Mackey: “I was always having to explain. It was boring for me.”
The animal-welfare standards, along with the company’s sustainable-seafood policy (it sells no fish at low levels of abundance), Responsibly Grown ratings, and decision to become the first national grocery chain to label whether products contain genetically modified organisms, all show a bit of Mackey’s libertarian streak. (He has given $50,000 to a Super PAC backing Rand Paul.) The company has no intention of waiting around until the USDA or some other governing body sets new rules.
His dismissiveness of such rule-making agencies may have been supercharged by past experience. In 2007—the last time, according to Mackey, that Whole Foods was in a cyclical trough—the company was facing off against the Federal Trade Commission, which had challenged Whole Foods’ proposed acquisition of a smaller health food chain, Wild Oats.
During the legal wrangling, the FTC revealed that over a period of years—and under a screen-name alias—Mackey had been promoting his company (and taking the occasional potshot at Wild Oats) in more than 1,000 comments on Yahoo Finance message boards. The SEC, in turn, launched an informal investigation, which left Mackey reeling in anxiety.
That personal emotional bottom, however, led to an awakening of sorts. “I did a lot of spiritual work,” he says, and came to the realization that if he wanted to continue to be the CEO of Whole Foods, there couldn’t be any aspect of his life that was secretive or hidden that would be embarrassing should it become public.
The deal went through, and the SEC dropped the investigation without action. Afterward, Mackey didn’t have any fear in his life, he says. He just let it all go. “Even with this crisis we’re in now,” he says, “I never felt anxious about it or nervous about it. I just don’t feel that anymore.”
But those who know Mackey say that, in fact, he does worry—not so much about doing the right thing but about figuring out what that right thing is. “One of the great things about John Mackey is he’s opinion-rich, but he’s educated,” says Roy Spence, chairman and co-founder of advertising agency GSD&M and a longtime friend of Mackey’s. “He will dog it until he understands what is the right thing to do.”
Mackey is now working on a book called The Whole Foods Diet, based on eating 90% plant-based foods. Sitting on his patio at his summer house in Boulder, he pulls out his iPad to forward me an article on a new study from the Centers for Disease Control and Prevention that found that only about one in 10 Americans eats the recommended minimum five servings a day of fruit and vegetables. “Food culture in America is very toxic,” he explains. “We’re food addicts.” Mackey starts rattling off statistics—54% of our calories come from refined sugars, grains, and oils—basically processed junk food; 32% from animal foods; only 14% are whole plant foods, and a good portion of that comes from fried potatoes. “That’s the obesity problem right there—Americans eat calorie-dense foods.” He adds, “I always say if we were to design a diet to kill people, this is what we would feed them.”
These are not new ideas, but Mackey is creating a model for people to follow. He also has a louder megaphone than most. It’s much like what he did with his first book in conveying what many may have already instinctively known or felt about capitalism. “Once they have a pathway, they can follow it, and everything is a lot faster and easier,” he says. “I like creating those pathways.”
Blending Nonprofit With Profit
Whole Foods has launched three in-house foundations to address challenges facing the local—and global—community.
Whole Cities (Founded in 2014)
This article needs attention from an expert in International Development. Please add a reason or a talk parameter to this template to explain the issue with the article. WikiProject International Development may be able to help recruit an expert.(August 2015)
Poverty reduction, or poverty alleviation, is a set of measures, both economic and humanitarian, that are intended to permanently lift people out of poverty.
Measures, like those promoted by Henry George in his economics classic Progress and Poverty, are those that raise, or are intended to raise, ways of enabling the poor to create wealth for themselves as a means of ending poverty forever. In modern times, various economists within the Georgism movement propose measures like the land value tax to enhance access to the natural world for all. Poverty occurs in both developing countries and developed countries. While poverty is much more widespread in developing countries, both types of countries undertake poverty reduction measures.
Poverty has been historically accepted in some parts of the world as inevitable as non-industrialized economies produced very little while populations grew almost as fast, making wealth scarce. Geoffrey Parker wrote that
In Antwerp and Lyon, two of the largest cities in western Europe, by 1600 three-quarters of the total population were too poor to pay taxes, and therefore likely to need relief in times of crisis.
Poverty reduction occurs largely as a result of overall economic growth.Food shortages were common before modern agricultural technology and in places that lack them today, such as nitrogen fertilizers, pesticides and irrigation methods. The dawn of industrial revolution led to high economic growth, eliminating mass poverty in what is now considered the developed world. World GDP per person quintupled during the 20th century. In 1820, 75% of humanity lived on less than a dollar a day, while in 2001, only about 20% did.
Today, continued economic development is constrained by the lack of economic freedoms. Economic liberalization requires extending property rights to the poor, especially to land.Financial services, notably savings, can be made accessible to the poor through technology, such as mobile banking. Inefficient institutions, corruption, and political instability can also discourage investment. Aid and government support in health, education, and infrastructure helps growth by increasing human and physical capital.
Poverty alleviation also involves improving the living conditions of people who are already poor. Aid, particularly in the medical and scientific areas, is essential in providing better lives, such as the Green Revolution and the eradication of smallpox. Problems with today's development aid include the high proportion of tied aid, which mandates receiving nations to buy products, often more expensive, originating only from donor countries. Nevertheless, some believe (Peter Singer in his book The Life You Can Save) that small changes in the way each of us in affluent nations lives our lives could solve world poverty.
Some commentators have claimed that, due to economic liberalization, poverty in the world is rising rather than declining, and the data provided by the World Bank, which shows poverty is decreasing, is flawed. They also argue that extending property rights protection to the poor is one of the most important poverty reduction strategies a nation can implement. Securing property rights to land, the largest asset for most societies, is vital to their economic freedom. The World Bank concludes that increasing land rights is ‘the key to reducing poverty’ citing that land rights greatly increase poor people’s wealth, in some cases doubling it. It is estimated that state recognition of the property of the poor would give them assets worth 40 times all the foreign aid since 1945. Although approaches varied, the World Bank said the key issues were security of tenure and ensuring land transactions were low cost. In China and India, noted reductions in poverty in recent decades have occurred mostly as a result of the abandonment of collective farming in China and the cutting of government red tape in India.
New enterprises and foreign investment can be driven away by the results of inefficient institutions, corruption, the weak rule of law and excessive bureaucratic burdens. It takes two days, two bureaucratic procedures, and $280 to open a business in Canada while an entrepreneur in Bolivia must pay $2,696 in fees, wait 82 business days, and go through 20 procedures to do the same. Such costly barriers favor big firms at the expense of small enterprises where most jobs are created. In India before economic reforms, businesses had to bribe government officials even for routine activities, which was in effect a tax on business.
However, ending government sponsorship of social programs is sometimes advocated as a free market principle with tragic consequences. For example, the World Bank presses poor nations to eliminate subsidies for fertilizer that many farmers cannot afford at market prices. The reconfiguration of public financing in former Soviet states during their transition to a market economy called for reduced spending on health and education, sharply increasing poverty.
Trade liberalization increases total surplus of trading nations. Remittances sent to poor countries, such as India, are sometimes larger than foreign direct investment and total remittances are more than double aid flows from OECD countries. Foreign investment and export industries helped fuel the economic expansion of fast growing Asian nations. However, trade rules are often unfair as they block access to richer nations’ markets and ban poorer nations from supporting their industries. Processed products from poorer nations, in contrast to raw materials, get vastly higher tariffs at richer nations' ports. A University of Toronto study found the dropping of duty charges on thousands of products from African nations because of the African Growth and Opportunity Act was directly responsible for a "surprisingly large" increase in imports from Africa. Deals can sometimes be negotiated to favor the developing country such as in China, where laws compel foreign multinationals to train their future Chinese competitors in strategic industries and render themselves redundant in the long term. In Thailand, the 51 percent rule compels multinational corporations starting operations in Thailand give 51 percent control to a Thai company in a joint venture.
Capital, infrastructure and technology
Long run economic growth per person is achieved through increases in capital (factors that increase productivity), both human and physical, and technology. Improving human capital, in the form of health, is needed for economic growth. Nations do not necessarily need wealth to gain health. For example, Sri Lanka had a maternal mortality rate of 2% in the 1930s, higher than any nation today. It reduced it to 0.5–0.6% in the 1950s and to 0.06% today. However, it was spending less each year on maternal health because it learned what worked and what did not. Knowledge on the cost effectiveness of healthcare interventions can be elusive but educational measures to disseminate what works are available, such as the disease control priorities project. Promoting hand washing is one of the most cost effective health intervention and can cut deaths from the major childhood diseases of diarrhea and pneumonia by half.
Human capital, in the form of education, is an even more important determinant of economic growth than physical capital.Deworming children costs about 50 cents per child per year and reduces non-attendance from anemia, illness and malnutrition and is only a twenty-fifth as expensive to increase school attendance as by constructing schools.
UN economists argue that good infrastructure, such as roads and information networks, helps market reforms to work. China claims it is investing in railways, roads, ports and rural telephones in African countries as part of its formula for economic development. It was the technology of the steam engine that originally began the dramatic decreases in poverty levels. Cell phone technology brings the market to poor or rural sections. With necessary information, remote farmers can produce specific crops to sell to the buyers that brings the best price.
Such technology also helps bring economic freedom by making financial services accessible to the poor. Those in poverty place overwhelming importance on having a safe place to save money, much more so than receiving loans. Also, a large part of microfinance loans are spent on products that would usually be paid by a checking or savings account.Mobile banking addresses the problem of the heavy regulation and costly maintenance of saving accounts. Mobile financial services in the developing world, ahead of the developed world in this respect, could be worth $5 billion by 2012.Safaricom’s M-Pesa launched one of the first systems where a network of agents of mostly shopkeepers, instead of bank branches, would take deposits in cash and translate these onto a virtual account on customers' phones. Cash transfers can be done between phones and issued back in cash with a small commission, making remittances safer.
However, several academic studies have shown that mobile phones have only limited affect on poverty reduction when not accompanied by other basic infrastructure development.
Employment and productivity
Economic growth has the indirect potential to alleviate poverty, as a result of a simultaneous increases in employment opportunities and labour productivity. A study by researchers at the Overseas Development Institute (ODI) of 24 countries that experienced growth found that in 18 cases, poverty was alleviated. However, employment is no guarantee of escaping poverty, the International Labour Organisation (ILO) estimates that as many as 40% of workers are poor, not earning enough to keep their families above the $2 a day poverty line. For instance, in India most of the chronically poor are wage earners in formal employment, because their jobs are insecure and low paid and offer no chance to accumulate wealth to avoid risks. This appears to be the result of a negative relationship between employment creation and increased productivity, when a simultaneous positive increase is required to reduced poverty. According to the UNRISD, increasing labour productivity appears to have a negative impact on job creation: in the 1960s, a 1% increase in output per worker was associated with a reduction in employment growth of 0.07%, by the first decade of this century the same productivity increase implies reduced employment growth by 0.54%.
Increases in employment without increases in productivity leads to a rise in the number of "working poor", which is why some experts are now promoting the creation of "quality" and not "quantity" in labour market policies. This approach does highlight how higher productivity has helped reduce poverty in East Asia, but the negative impact is beginning to show. In Viet Nam, for example, employment growth has slowed while productivity growth has continued. Furthermore, productivity increases do not always lead to increased wages, as can be seen in the US, where the gap between productivity and wages has been rising since the 1980s. The ODI study showed that other sectors were just as important in reducing unemployment, as manufacturing. The services sector is most effective at translating productivity growth into employment growth. Agriculture provides a safety net for jobs and economic buffer when other sectors are struggling. This study suggests a more nuanced understanding of economic growth and quality of life and poverty alleviation.
Raising farm incomes is described as the core of the antipoverty effort as three quarters of the poor today are farmers. Estimates show that growth in the agricultural productivity of small farmers is, on average, at least twice as effective in benefiting the poorest half of a country’s population as growth generated in nonagricultural sectors. For example, a 2012 study suggested that new varieties of chickpea could benefit Ethiopian farmers in future. The study assessed the potential economic and poverty impact of 11 improved chickpea varieties, released by the national agricultural research organization of Ethiopia in collaboration with the International Crops Research Institute for the Semi-Arid Tropics, (ICRISAT). The researchers estimated that using the varieties would bring about a total benefit of US$111 million for 30 years with consumers receiving 39% of the benefit and producers 61%. They expected the generated benefit would lift more than 0.7 million people (both producers and consumers) out of poverty. The authors concluded that further investments in the chickpea and other legume research in Ethiopia were therefore justified as a means of poverty alleviation.
Improving water management is an effective way to help reduce poverty among farmers. With better water management, they can improve productivity and potentially move beyond subsistence-level farming. During the Green Revolution of the 1960s and 1970s, for example, irrigation was a key factor in unlocking Asia's agricultural potential and reducing poverty. Between 1961 and 2002, the irrigated area almost doubled, as governments sought to achieve food security, improve public welfare and generate economic growth. In South Asia, cereal production rose by 137% from 1970 to 2007. This was achieved with only 3% more land.
The International Water Management Institute in Colombo, Sri Lanka aims to improve the management of land and water resources for food, livelihoods and the environment. One project its scientists worked on demonstrates the impact that improving water management in agriculture can have. The study, funded by the Japan Bank for International Cooperation, initially upgraded and irrigated the irrigation system on the Walawe Left Bank, Sri Lanka, in 1997. In 2005, irrigation was extended to a further area. An analysis of the whole area was carried out in 2007 and 2008. This study found that access to irrigation provided families with opportunities to diversify their livelihood activities and potentially increase their incomes. For example, people with land could reliably grow rice or vegetables instead of working as labourers or relying on rainfall to water their crops. Those without land could benefit by working within new inland fisheries. Within the project's control area, 57% of households were below the poverty line in 2002 compared with 43% in 2007.
Building opportunities for self-sufficiency
Making employment opportunities available is just as important as increasing income and access to basic needs. Poverty activist Paul Polak has based his career around doing both at once, creating companies that employ the poor while creating "radically" affordable goods. In his book Out of Poverty he argues that traditional poverty eradication strategies have been misguided and fail to address underlying problems. He lists, “Three Great Poverty Eradication Myths”: that we can donate people out of poverty, that national economic growth will end poverty, and that Big Business, operating as it does now, will end poverty. Economic models which lead to national growth and more big business will not necessarily lead to more opportunities for self-sufficiency. However, businesses designed with a social goal in mind, such as micro finance banks, may be able to make a difference.
Growth vs. state intervention: comparative perspective in China, India, Brazil
A 2012 World Bank research article, “A Comparative Perspective on Poverty Reduction in Brazil, China, and India,” looked at the three nations’ strategies and their relative challenges and successes. During their reform periods, all three have reduced their poverty rates, but through a different mix of approaches. The report used a common poverty line of $1.29 per person, per day, at purchasing parity power for consumption in 2008. Using that metric and evaluating the period between 1981 and 2005, the poverty rate in China dropped from 84% to 18%; India from 80% to 42%; and Brazil from 17% to 8%. The report sketches an overall scorecard of the countries on the two basic dimensions of pro-poor growth and pro-poor policy intervention: “China clearly scores well on the pro-poor growth side of the card, but neither Brazil nor India do; in Brazil’s case for lack of growth and in India’s case for lack of poverty-reducing growth. Brazil scores well on the social policies side, but China and India do not; in China’s case progress has been slow in implementing new social policies more relevant to the new market economy (despite historical advantages in this area, inherited from the past regime) and in India’s case the bigger problems are the extent of capture of the many existing policies by non-poor groups and the weak capabilities of the state for delivering better basic public services.”
Main article: Aid
Main article: Welfare's effect on poverty
Aid in its simplest form is a basic income grant, a form of social security periodically providing citizens with money. In pilot projects in Namibia, where such a program pays just $13 a month, people were able to pay tuition fees, raising the proportion of children going to school by 92%, child malnutrition rates fell from 42% to 10% and economic activity grew 10%. Aid could also be rewarded based on doing certain requirements. Conditional Cash Transfers, widely credited as a successful anti-poverty program, is based on actions such as enrolling children in school or receiving vaccinations. In Mexico, for example, the country with the largest such program, dropout rates of 16- to 19-year-olds in rural area dropped by 20% and children gained half an inch in height. Initial fears that the program would encourage families to stay at home rather than work to collect benefits have proven to be unfounded. Instead, there is less excuse for neglectful behavior as, for example, children are prevented from begging on the streets instead of going to school because it could result in suspension from the program.
Welfare states have an effect on poverty reduction. Currently modern, expansive welfare states that ensure economic opportunity, independence and security in a near universal manner are still the exclusive domain of the developed nations. commonly constituting at least 20% of GDP, with the largest Scandinavian welfare states constituting over 40% of GDP. These modern welfare states, which largely arose in the late 19th and early 20th centuries, seeing their greatest expansion in the mid 20th century, and have proven themselves highly effective in reducing relative as well as absolute poverty in all analyzed high-income OECD countries.
Philosopher Thomas Pogge is a supporter of gathering funds for the poor by using a sort of Global Resources Dividend.
See also: Development aid and Tied aid
A major proportion of aid from donor nations is ‘tied’, mandating that a receiving nation buy products originating only from the donor country. This can be harmful economically. For example, Eritrea is forced to spend aid money on foreign goods and services to build a network of railways even though it is cheaper to use local expertise and resources. Money from the United States to fight AIDS requires it be spent on U.S brand name drugs that can cost up to $15,000 a year compared to $350 a year for generics from other countries. Only Norway, Denmark, Netherlands and Britain have stopped tying their aid.
Some people disagree with aid when looking at where the development aid money from NGO's and other funding is going. Funding tends to be used in a selective manner where the highest ranked health problem is the only thing treated, rather than funding basic health care development. This can occur due to a foundation's underlying political aspects to their development plan, where the politics outweigh the science of disease. The diseases then treated are ranked by their prevalence, morbidity, risk of mortality, and the feasibility of control. Through this ranking system, the disease that cause the most mortality and are most easily treated are given the funding. The argument occurs because once these people are treated, they are sent back to the conditions that led to the disease in the first place. By doing this, money and resources from aid can be wasted when people are re-infected. This was seen in the Rockefeller Foundation's Hookworm campaign in Mexico in the 1920s, where people were treated for hookworm and then contracted the disease again once back in the conditions of which they came from. To prevent this, money could be spent on teaching citizens of the developing countries health education, basic sanitation, and providing adequate access to prevention methods and medical infrastructure. Not only would NGO money be better spent, but it would be more sustainable. These arguments suggest that the NGO development aid should be used for prevention and determining root causes rather acting upon political endeavours and treating for the sake of saying they helped.
Some think tanks and NGOs have argued that Western monetary aid often only serves to increase poverty and social inequality, either because it is conditioned with the implementation of harmful economic policies in the recipient countries, or because it's tied with the importing of products from the donor country over cheaper alternatives. Sometimes foreign aid is seen to be serving the interests of the donor more than the recipient, and critics also argue that some of the foreign aid is stolen by corrupt governments and officials, and that higher aid levels erode the quality of governance. Policy becomes much more oriented toward what will get more aid money than it does towards meeting the needs of the people. Problems with the aid system and not aid itself are that the aid is excessively directed towards the salaries of consultants from donor countries, the aid is not spread properly, neglecting vital, less publicized area such as agriculture, and the aid is not properly coordinated among donors, leading to a plethora of disconnected projects rather than unified strategies.
Supporters of aid argue that these problems may be solved with better auditing of how the aid is used. Immunization campaigns for children, such as against polio, diphtheria and measles have saved millions of lives. Aid from non-governmental organizations may be more effective than governmental aid; this may be because it is better at reaching the poor and better controlled at the grassroots level. As a point of comparison, the annual world military spending is over $1 trillion.
See also: Debt relief
One of the proposed ways to help poor countries that emerged during the 1980s has been debt relief. Given that many less developed nations have gotten themselves into extensive debt to banks and governments from the rich nations, and given that the interest payments on these debts are often more than a country can generate per year in profits from exports, cancelling part or all of these debts may allow poor nations "to get out of the hole". If poor countries do not have to spend so much on debt payments, they can use the money instead for priorities which help reduce poverty such as basic health-care and education. Many nations began offering services, such as free health care even while overwhelming the health care infrastructure, because of savings that resulted from the rounds of debt relief in 2005.
The role of education and skillbuilding as precursors to economic development
Universal public education has some role in preparing youth for basic academic skills and perhaps many trade skills, as well. Apprenticeships clearly build needed trade skills. If modest amounts of cash and land can be combined with a modicum of agricultural skills in a temperate climate, subsistence can give way toward modest societal wealth. As has been mentioned, education for women will allow for reduced family size—an important poverty reduction event in its own right. While all components mentioned above are necessary, the portion of education pertaining to the variety of skills needed to build and maintain the infrastructure of a developing (moving out of poverty) society: building trades; plumbing; electrician; well-drilling; farm and transport mechanical skills (and others) are clearly needed in large numbers of individuals, if the society is to move out of poverty or subsistence. Yet, many well-developed western economies are moving strongly away from the essential apprenticeships and skill training which affords a clear vocational path out of modern urban poverty.
One of the most popular of the new technical tools for economic development and poverty reduction are microloans made famous in 1976 by the Grameen Bank in Bangladesh. The idea is to loan small amounts of money to farmers or villages so these people can obtain the things they need to increase their economic rewards. A small pump costing only $50 could make a very big difference in a village without the means of irrigation. A specific example is the Thai government's People's Bank which is making loans of $100 to $300 to help farmers buy equipment or seeds, help street vendors acquire an inventory to sell, or help others set up small shops. The International Fund for Agricultural Development(IFAD) Vietnam country programme supports operations in 11 poor provinces. Between 2002 and 2010 around 1,000 saving and credit groups (SCGs) were formed, with over 17,000 members; these SCGs increased their access to microcredit for taking up small-scale farm activities.
See also: Women's education and development
The empowerment of women has relatively recently become a significant area of discussion with respect to development and economics; however it is often regarded as a topic that only addresses and primarily deals with gender inequality. Because women and men experience poverty differently, they hold dissimilar poverty reduction priorities and are affected differently by development interventions and poverty reduction strategies. In response to the socialized phenomenon known as the feminization of poverty, policies aimed to reduce poverty have begun to address poor women separately from poor men. In addition to engendering poverty and poverty interventions, a correlation between greater gender equality and greater poverty reduction and economic growth has been illustrated by research through the World Bank, suggesting that promoting gender equality through empowerment of women is a qualitatively significant poverty reduction strategy.
Addressing gender equality and empowering women are necessary steps in overcoming poverty and furthering development as supported by the human development and capabilities approach and the Millennium Development Goals. Disparities in the areas of education, mortality rates, health and other social and economic indicators impose large costs on well-being and health of the poor, which diminishes productivity and the potential to reduce poverty. The limited opportunities of women in most societies restrict their aptitude to improve economic conditions and access services to enhance their well-being.
Gender mainstreaming, the concept of placing gender issues into the mainstream of society, was established by the United Nations Fourth World Conference on Women as a global strategy for promoting gender equality; the UN conference emphasized the necessity to ensure that gender equality is a primary goal in all areas of social and economic development, which includes the discussion of poverty and its reduction. Correspondingly, the World Bank also created objectives to address poverty with respect to the different effects on women. One important goal was the revision of laws and administrative practices to ensure women’s equal rights and access to economic resources. Mainstreaming strengthens women’s active involvement in poverty alleviation by linking women’s capabilities and contributions with macro-economic issues. The underlying purpose of both the UN and World Bank policies speaks to the use of discussion of gender issues in the promotion of gender equality and reduction of poverty.
Strategies to empower women
Several platforms have been adopted and reiterated across many organizations in support of the empowerment of women with the specific aim of reducing poverty. Encouraging more economic and political participation by women increases financial independence from and social investment in the government, both of which are critical to pulling society out of poverty.
Women’s economic empowerment, or ensuring that women and men have equal opportunities to generate and manage income, is an important step to enhancing their development within the household and in society. Additionally, women play an important economic role in addressing poverty experienced by children. By increasing female participation in the labor force, women are able to contribute more effectively to economic growth and income distribution since having a source of income elevates their financial and social status. However, women’s entry into the paid labor force does not necessarily equate to reduction of poverty; the creation of decent employment opportunities and movement of women from the informal work sector to the formal labor market are key to poverty reduction. Other ways to encourage female participation in the workforce to promote decline of poverty include providing childcare services, increasing educational quality and opportunities, and furthering entrepreneurship for women. Protection of property rights is a key element in economically empowering women and fostering economic growth overall for both genders. With legitimate claims to land, women gain bargaining power, which can be applied to their lives outside of and within the household. The ability and opportunity for women to lawfully own land also decreases the asset gap that exists between women and men, which promotes gender equality.
Political participation is supported by organizations such as IFAD as one pillar of gender equality and women’s empowerment. Sustainable economic growth requires poor people to have influence on the decisions that affect their lives; specifically strengthening women’s voices in the political process builds social independence and greater consideration of gender issues in policy. In order to promote women’s political empowerment, the United Nations Development Programme advocated for several efforts: increase women in public office; strengthen advocate ability of women’s organizations; ensure fair legal protection; and provide equivalent health and education. Fair political representation and participation enable women to lobby for more female-specific poverty reduction policies and programs.
See also: Political corruption
Efficient institutions that are not corrupt and obey the rule of law make and enforce good laws that provide security to property and businesses. Efficient and fair governments would work to invest in the long-term interests of the nation rather than plunder resources through corruption. Researchers at UC Berkeley developed what they called a "Weberianness scale" which measures aspects of bureaucracies and governments which Max Weber described as most important for rational-legal and efficient government over 100 years ago. Comparative research has found that the scale is correlated with higher rates of economic development. With their related concept of good governance World Bank researchers have found much the same: Data from 150 nations have shown several measures of good governance (such as accountability, effectiveness, rule of law, low corruption) to be related to higher rates of economic development.
Funds from aid and natural resources are often diverted into private hands and then sent to banks overseas as a result of graft. If Western banks rejected stolen money, says a report by Global Witness, ordinary people would benefit “in a way that aid flows will never achieve”. The report asked for more regulation of banks as they have proved capable of stanching the flow of funds linked to terrorism, money-laundering or tax evasion.
Some, like Thomas Pogge, call for a global organization that can manage some form of Global Resources Dividend, which could evolve in complexity with time.
Examples of good governance leading to economic development and poverty reduction include Thailand, Taiwan, Malaysia, South Korea, and Vietnam, which tend to have a strong government, called a hard state or development state. These “hard states” have the will and authority to create and maintain policies that lead to long-term development that helps all their citizens, not just the wealthy. Multinational corporations are regulated so that they follow reasonable standards for pay and labor conditions, pay reasonable taxes to help develop the country, and keep some of the profits in the country, reinvesting them to provide further development.
The United Nations Development Program published a report in April 2000 which focused on good governance in poor countries as a key to economic development and overcoming the selfish interests of wealthy elites often behind state actions in developing nations. The report concludes that “Without good governance, reliance on trickle-down economic development and a host of other strategies will not work.” Despite the promise of such research several questions remain, such as where good governance comes from and how it can be achieved. The comparative analysis of one sociologist suggests that broad historical forces have shaped the likelihood of good governance. Ancient civilizations with more developed government organization before colonialism, as well as elite responsibility, have helped create strong states with the means and efficiency to carry out development policies today. On the other hand, strong states are not always the form of political organization most conducive to economic development. Other historical factors, especially the experiences of colonialism for each country, have intervened to make a strong state and/or good governance less likely for some countries, especially in Africa. Another important factor that has been found to affect the quality of institutions and governance was the pattern of colonization (how it took place) and even the identity of colonizing power. International agencies may be able to promote good governance through various policies of intervention in developing nations as indicated in a few African countries, but comparative analysis suggests it may be much more difficult to achieve in most poor nations around the world.
Another approach that has been proposed for alleviating poverty is Fair Trade which advocates the payment of an above market price as well as social and environmental standards in areas related to the production of goods. The efficacy of this approach to poverty reduction is controversial.
Community and monetary economist Thomas H. Greco, Jr. has argued that the mainstream global economy with its debt-based currency has built-in structural incentives that create poverty through keeping money scarce. Greco points to the success of modern barter clubs and historical local currencies such as the Wörgl Experiment at revitalizing stagnant local economies, and calls for the creation of community currency as a means to reduce or eliminate poverty.
The Toronto Dollar is an example of a local currency oriented towards reducing poverty. Toronto Dollars are sold and redeemed in such a way that raise funds which are then given as grants to local charities, primarily ones oriented towards reducing poverty. Toronto Dollars also provide a means to create an incentive for welfare recipients to work: Toronto dollars can be given as gifts to welfare recipients who perform volunteer work for charitable and non-profit organizations, and these gifts do not affect welfare benefits.
Some have argued for radical economic change in the system. There are several fundamental proposals for restructuring existing economic relations, and many of their supporters argue that their ideas would reduce or even eliminate poverty entirely if they were implemented. Such proposals have been put forward by both left-wing and right-wing groups: socialism, communism, anarchism, libertarianism, binary economics and participatory economics, among others.
Inequality can be reduced by progressive tax.
In law, there has been a move to establish the absence of poverty as a human right.
The IMF and member countries have produced Poverty Reduction Strategy papers or PRSPs.
In his book "The End of Poverty", a prominent economist named Jeffrey Sachs laid out a plan to eradicate global poverty by the year 2025. Following his recommendations, international organizations such as the Global Solidarity Network are working to help eradicate poverty worldwide with intervention in the areas of housing, food, education, basic health, agricultural inputs, safe drinking water, transportation and communications.
The Poor People's Economic Human Rights Campaign is an organization in the United States working to secure freedom from poverty for all by organizing the poor themselves. The Campaign believes that a human rights framework, based on the value of inherent dignity and worth of all persons, offers the best means by which to organize for a political solution to poverty. Makes camps of anti-poverty.
Also one approach to reduce poverty was with Norplant, a form of birth control, which was approved in the United States on December 10, 1990. Norplant prevents pregnancy for up to five years by gradually releasing a low dose of the hormone into the bloodstream. In an article in the Philadelphia Inquirer entitled "Poverty and Norplant: Can Contraception Reduce the Underclass?", deputy editorial-page editor Donald Kimelman proposed Norplant as a solution to inner-city poverty, arguing that "the main reason black children are living in poverty is that people having the most children are the ones least capable of supporting them. Kimelman claimed in his article "it's very tough to undo the damage of being born into a dysfunctional family. So why not make a major effort to reduce the number of children, of any race, born into such circumstances?" According to Dorothy Roberts book "Killing the Black Body: Race, Reproduction, and the Meaning of Liberty", within two years of Norplant being approved thirteen state legislatures had proposed some twenty measures to implant poor women with Norplant and a number of these bills would pressure women on welfare to use the device either by requiring implantation as a condition of receiving benefits or by offering them a financial bonus. Every state made Norplant available to women for free through Medicaid or other forms of public assistance and to teenage girls through school programs that presented Norplant as the most reasonable option. Efforts were also made to provide Norplant to women without Medicaid. As Roberts stated, "California governor Pete Wilson allocated an extra $5 million to reimburse state-funded clinics for Norplant going to women without Medicaid or Medi-Cal coverage."
Climate change adaptation
The increase in extreme weather events, linked to climate change, and resulting disasters is expected to continue. Disasters are a major cause of impoverishment and can reverse progress towards poverty reduction.
It is predicted that by 2030, 325 million (plus) extremely poor people will be living in the 49 most hazard prone countries. Most of these are located in South Asia and Sub-Saharan Africa.
A researcher at a leading global think-tank, the Overseas Development Institute, suggests that far more effort should be done to better coordinate and integrate poverty reduction strategies with climate change adaptation. The two issues are argued to be currently only dealt with in parallel as most poverty reduction strategy papers ignore climate change adaptation altogether, while National Adaptation Programmes of Action (NAPAs) likewise do not deal directly with poverty reduction. Adaptation-poverty linkages were found to be strongest in NAPAs from sub-Saharan Africa LDCs.
Main article: Bicycle poverty reduction
Experiments done in Africa (Uganda and Tanzania) and Sri Lanka on hundreds of households have shown that a bicycle can increase the income of a poor family by as much as 35%. Transport, if analyzed for the cost-benefit analysis for rural poverty alleviation, has given one of the best returns in this regard. For example, road investments in India were a staggering 3–10 times more effective than almost all other investments and subsidies in rural economy in the decade of the 1990s. What a road does at a macro level to increase transport, the bicycle supports at the micro level. The bicycle, in that sense, can be one of the best means to eradicate poverty in poor nations.
Millennium Development Goals (MDGs)
Eradication of extreme poverty and hunger by 2015 is a Millennium Development Goal. In addition to broader approaches, the Sachs Report (for the UN Millennium Project) proposes a series of "quick wins", approaches identified by development experts which would cost relatively little but could have a major constructive effect on world poverty. The quick wins are:
Sustainable Development Goals (SDGS)
The first objective of the (SDGS) calls for an end to poverty by 2030 and seeks to ensure social protection for the poor and supporting people affected by climate-related extreme events As the decade that began in 2002, the percentage of the world's population living under the poverty line by half, from 26 per cent to 13 per cent. If during those 10 years growth rates prevailed over the next 15 years, it is possible to decrease the rate of extreme poverty in the world to 4 per cent by 2030, assuming that growth will benefit all income groups of the population on an equal footing. However, if the growth rates over a longer period of 20 years, the rate of prevalent global poverty is likely to be about 6 per cent. In other words, the eradication of extreme poverty will require a significant change from its historical growth rates.
SDGS believes that poverty reduction needs to:
That disaster risk reduction is necessary to end poverty and promote sustainable development.
Still greater social protection to those most in need priority 
Global initiatives to end hunger and undernutrition
An important part of the fight against poverty are efforts to end hunger and achieve food security. In April 2012, the Food Assistance Convention was signed, the world's first legally binding international agreement on food aid. The May 2012 Copenhagen Consensus recommended that efforts to combat hunger and malnutrition should be the first priority for politicians and private sector philanthropists looking to maximize the effectiveness of aid spending. They put this ahead of other priorities, like the fight against malaria and AIDS.
The main global policy to reduce hunger and poverty are the recently approved Sustainable Development Goals. In particular Goal 2: Zero Hunger sets globally agreed targets to end hunger, achieve food security and improved nutrition and promote sustainable agriculture.